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Comment by DannoHung | Hacker News Reader

Can someone explain to me how someone would be paid a salary in bitcoins?

In the United States, you cannot lawfully be paid a salary in "bitcoins". Nor can you negotiate a contract that claims that you're a contractor and not an employee if your role is substantially that of an employee (meaning: the entity paying you controls the means, scheduling, and financing of your work over a prolonged period).

You can of course enter into an arrangement with a company, do work for the company, receive "bitcoins" from the company, and both go on your merry way. But the company "paying" you has exposed itself to extreme liability with the IRS; it is probably on the hook not only for the employers half of dollar-denominated self-employment tax, but for the employee's half as well, plus penalties, interest, and legal fees.

What is the law that prohibits payment in bitcoins? Is payment in euros also illegal?

(Might you be conflating payment in bitcoins with payment off the books?)

There are at least two things in every employment case, and at least one additional thing in the company principal case, that will keep wages anchored to dollars no matter what form of unicorn dollar we come up with next:

* There is a dollar-denominated minimum wage

* There is dollar-denominated payroll tax and, for contractors, dollar-denominated self-employment tax that scales in dollar-denominated amounts whether you're paid in moon cakes or rare freshwater fish.

* And, if you're a company principal of a non-passthrough entity, there is an IRS requirement that you be paid a wage that corresponds to the fair market value of your role, and anything you do to not pay yourself a reasonable-looking dollar-denominated wage stands a good chance of getting you audited (this rule being one of the primary ways business owners attempt to avoid paying taxes).

It's only been fairly recently that the Department of Labor has issued opinions about foreign nationals being paid in foreign currency based on the current exchange rate available in the vicinity of the employer; that is, there are very specific cases in which you can pay someone both Euros and Dollars. Making geeky assumptions that, because some PHP program somewhere generates some number people call an "exchange rate" that means Bitcoins get you around the FLSA minimum wage... dubious and risky.

Don't know about the US, but the UK has a number of anti-trucking laws that would possibly prohibit it.

Ithica NY seems to be dealing with these issues pretty well with its Hours currency: http://www.ithacahours.com/intro.html

To answer my own post: I think everyone has misunderstood my point. Bitcoin valuation is unstable due to constant deflation (at best, you're only losing them to people dying or systems crashing or the basic fact that more and more actually valuable things are created, say a fusion engine, oh and the fact that as more and more people are born, you have fewer and fewer bitcoins spread amongst them). Given that the future is unknowable and it's unlikely that I'm going to submit to having my employer renegotiate my contract day to day, how am I going to be paid a salary in bitcoins?

To make it less about me also: How instead would you say to your employer (just accept this as part of the hypothetical question, you work for someone in a fundamentally permanent salaried employ), this is how I want my salary in bitcoins to be set. Or if you are completely incapable of imagining working for someone else, how would you frame a salaried employment for an employee in bitcoins?

The contractor (or employee) would negotiate the appropriate contract with the customer (or employer). Typically these days such contracts specify that all payments will be made in an instrument such as USD or EUR, but the contract could just as easily specify BTC.

Alternatively, the contract could specify that payments will be made in BTC, but the payment amount will depend on an exchange rate with some other instrument such as USD or EUR. In that case the customer is merely providing the exchange function as part of the contract.

No, not in the US, you can't.

The transaction can happen. I think the problem is in converting your bitcoins to USD or EUR since they are not used in real life.

A PayPal alternative for BitCoin (think CoinPal), will be a good start for non-geeks. However, the currency needs to have some stability so that people can trust it for their real money.

Someone who has bitcoins and employs you, then transfers an agreed number of bitcoins to you in recompense.

That seems obvious, so I'm sure I must have mis-understood, or not understood, your question.

In what country is this arrangement lawful and enforceable?

Ah, now I see the point.

In the UK I believe it's possible to agree a salary/payment at an amount of recognized currency, such as GBP or USD, and then you perform all your tax and related calculations based on that. How the payment is actually transferred is, potentially, up to the people involved.

I believe that I can contract my services at, say, 100 GBP per hour, bill for one hour, and then accept payment in bitcoin, stating that there is an agreed rate of exchange. If the stated underlying rates are not regarded as "unusual" by the HMRC then most likely the arrangement would be permitted to stand.

There are laws concerning "payment in kind" and I think this would fall under that. Note, I'm not an accountant or lawyer, but I've seen barter arrangements not dissimilar to this accepted as valid by HMRC.

In the US, you can arrange payment "in kind" for lodging, food, and "other facilities", but they are accounted for in dollar-denominated values and their fair market value can be determined by the government --- and likely will be, as fair-market value for in-kind compensation is a hotbutton issue for people who want to e.g. screw their housekeepers out of wages.

FLSA 3(m), also read the section in the FLSA handbook about "scrip" and "tokens" (which I understand bitcoin isn't --- scrip, which cannot lawfully be used as a wage substitute, only as an accounting mechanism for dollar-denominated wages) is at least backed by the full faith and credit of a company.

Perhaps that all means that you can pay in BitCoin, provided you assign a fair and reasonable exchange rate with the USD at the time?

Or, perhaps trying to do that would put you on the hook for hundreds of thousands of dollars in penalties.

I'm not really sure what you mean. If company X allows customers to pay for goods/services with bitcoins then they would be able to pay the wages of their employees using the bitcoins.

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